Offsetting debts
For deaths that occur on and after 17 July 2013 there is a change in how the value of the deceased person's estate is calculated for inheritance tax purposes (IHT). We outlined this new law in our Summer 2013 newsletter.
Previously any debt owed by a person on death was deducted from the total value of the estate, unless it was a mortgage attached to a specific building or piece of land. If money is borrowed on or after 6 April 2013 to acquire an asset that qualifies for a special tax relief - examples are business assets, woodlands or agricultural property - the debt must first be set off against the value of that asset before applying the relief. Any excess loan remaining after that set-off can be deducted from the value of the rest of the estate.
This change may increase the value of your estate which will be subject to IHT. If you haven't had a look recently at how much the taxman would think you are worth - and how much IHT you are exposed to - we can crunch over the numbers.